Federal Trade Commission Settles Price-Fixing Charges Against Washington University Physician Network

The Federal Trade Commission announced today that it has settled charges that a large physicians’ organization in the St. Louis, Missouri, greater metropolitan area engaged in price-fixing on behalf of its members. The proposed consent order with the Washington University Physician Network (WUPN), a non-profit corporation that includes approximately 1,500 faculty and independent community doctors, is designed to remedy the group’s allegedly anticompetitive collective bargaining practices. According to the FTC, such conduct is detrimental to consumers in the St. Louis area, and has resulted in higher prices for the services WUPN’s doctors provide.

“This group of St. Louis-area physicians engaged in overt price-fixing,” said Joe Simons, Director of the FTC’s Bureau of Competition. “Its conduct was plainly anticompetitive and harmful to consumers, by forcing up prices in the area. It is a straightforward violation of the FTC Act.”

Washington University Physician Network

Established in 1993, WUPN consists of Washington University, its 900 faculty physicians, and 600 community physicians who provide health care services in St. Louis and four neighboring counties. WUPN was established, in part, to facilitate collective negotiation among competing physicians to obtain more favorable prices and other terms from provider health plans, compared to those obtained through individually negotiated contracts. WUPN is a non-profit organization. While Section 4 of the FTC Act excludes certain types of non-profit corporations from Commission jurisdiction, the agency has jurisdiction over WUPN. Its community physicians, who operate for profit, play a significant role in governing the organization. WUPN provides substantial financial benefits for these community physician members.

The Commission’s Complaint

According to the Commission, WUPN has acted anticompetitively and in violation of the FTC Act by collectively negotiating contracts between its members and third-party payors, including insurers. The FTC contends that WUPN has successfully coerced a number of health plans to increase the fees they pay to the group’s member physicians, thereby raising the cost of medical care in the Greater St. Louis area. The complaint states that as a result of WUPN’s actions, consumers have been deprived of the benefits of competition among the group’s doctors. Other challenged conduct includes WUPN’s facilitating agreements among its members to deal with payors only on collectively-determined terms, and actual or threatened refusals to deal with health plans that would not meet these terms. According to the complaint, WUPN’s joint negotiation of prices and other challenged conduct is not related to any efficiency-enhancing integration.

Terms of the Proposed Consent Order

The proposed consent order reached with the Commission settles the price-fixing charges against WUPN. Under its terms, while WUPN will be allowed to engage in legitimate conduct on behalf of its members, it will be prohibited from entering into or facilitating any agreement between or among physicians: 1) to negotiate with payors on any physician’s behalf; 2) to deal, refuse to deal, or threaten not to deal with payors; 3) to determine on what terms to deal with any payor; or 4) not to deal individually with any payor, or not to deal with any payor through an arrangement other than WUPN.

In addition, the proposed order bars WUPN from facilitating exchanges of information among physicians concerning whether, or on what terms, to contract with a payor. It also bars attempts to engage in any actions prohibited above, including inducing anyone to engage in these actions. As in other orders of this kind that the FTC has entered into, the proposed order addresses certain kinds of agreements that are excluded from the general bar on joint negotiations, including WUPN’s participation in a “qualified risk-sharing joint arrangement” or a “qualified clinically integrated joint arrangement,” as those terms are defined in the proposed order. The order also allows agreements that solely involve Washington University faculty members’ provision of physicians services on behalf of Washington University.

Finally, the proposed order requires WUPN to send copies of the order to all of its participating physicians and others, and to end pre-existing contracts with any payor upon the payor’s written request to do so. New and prospective physician members must also receive a copy of the order, which will expire in 20 years.

The Commission vote to place the proposed consent order on the public record for comment was 5-0. An announcement regarding the proposed order will be published in the Federal Register shortly. It will be subject to public comment for 30 days, until August 11, 2003, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the Commission’s complaint, proposed consent order, and analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0188)